Figure's Margin Rose but It Earns Less on Every Loan

Investors took the margin at face value. Figure reported before the US market opened on 13 Aug and the shares closed that day at $31.92, up 3.5%, after reaching an intraday high of $33.77, 9.5% above their level the previous evening, according to TradingView. They eased to $31.45 by the close on 14 Aug.

Figure is not primarily a company exposed to cryptocurrencies. Its business is built around credit, particularly home equity lending, where a homeowner borrows against the value of their property. Blockchain provides the infrastructure for recording loans, tracking ownership and facilitating their financing or sale.

Historically, Figure made more of the loans itself, under its own brand. This model generates origination fees charged for arranging a loan, interest income and gains when loans are sold, but it also requires the company to fund the loans temporarily and bear their risk before transferring them.

Figure Connect changes that structure. Partner institutions bring the borrowers and loans, while Figure provides the technology and marketplace connecting sellers with investors. The company generates less revenue per dollar processed but should, in theory, need less capital.

This transition has accelerated sharply. Figure Connect represented 42% of Consumer Loan Marketplace (CLM) Volume, the total value of loans passing through the platform, in the second quarter of 2025, and 65% a year later. Of the $4.26bn processed in the latest quarter, $2.77bn came through Connect. That growth follows the volume surge across Figure's debt marketplace that Sandmark reported in February.

What the take rate actually measures

(Source : Figure)

The net take rate measures how Figure monetizes the volume passing through its platform. Figure adds selected revenue streams, including platform and technology fees, origination fees, gains on loan sales and the creation of mortgage servicing rights, which are the right to collect a borrower's payments for a fee and can be carried as an asset. It then deducts valuation changes in those rights and marketing expenses before dividing the result by CLM Volume.

A 3.6% take rate therefore means that Figure generates approximately $3.60 of these net revenues for every $100 processed. It is neither a profit margin nor total revenue divided by volume.

The rate declined from 4.0% to 3.6% over the year. Three factors explain most of the change. Figure Connect charges less than channels in which Figure originates or temporarily holds the loans itself. First-lien products, loans that rank first for repayment if a borrower defaults and therefore carry lower fees, are also growing as a share of volume. Changes in interest rates can affect the gains Figure earns when selling loans.

Connect contracts include volume-based pricing as well. When a partner reaches a higher volume tier, the price charged per loan falls. This does not necessarily represent a discount forced by competition, but the economic consequence is the same. Larger partners generate more volume at a lower unit fee.

Platform revenue, not technology expenditure

The ecosystem and technology fees line reached $72.9mn in the second quarter, equivalent to 32% of total revenue. Despite the word "fees," these are not costs paid by Figure. They are revenues charged to its customers.

This platform and technology revenue covers three main activities: Figure charges partners for using its loan-origination software, earns fees on partner loans traded through Connect and charges for arranging securitizations, in which loans are bundled into bonds and sold to investors. The line therefore extends beyond Figure Connect, although Connect has become its main growth driver.

It became the group's largest revenue line during the quarter. Its growth nevertheless remained below the increase in Connect volume, partly because larger partners reached lower pricing tiers.

A higher margin doesn't mean more EBITDA per loan

In the second quarter of 2025, Figure generated approximately $6.09 of adjusted revenue for every $100 of CLM Volume. One year later, that figure had fallen to $5.13.

Adjusted EBITDA generated from the same $100 declined from $2.88 to $2.80. The difference is limited, but it shows that Figure is not yet producing more EBITDA from each dollar passing through its platform.

Its adjusted EBITDA margin nevertheless rose from 47% to 55%. Revenue per dollar of volume declined more quickly than the corresponding EBITDA. Figure retained almost as much EBITDA on every $100 processed, but that EBITDA represented a larger proportion of a smaller revenue figure.

A one-off item further increased the reported margin. Adjusted EBITDA included a $5.9mn profit from the sale of a minority investment. Without that gain, the margin would have been close to 52%. Underlying adjusted EBITDA would then amount to approximately $2.66 for every $100 of volume, down from $2.88 a year earlier.

Absolute growth remains strong. Volume increased 132% and reported adjusted EBITDA rose 126% to $119.4mn. Figure is therefore absorbing a considerable increase in activity without allowing costs to rise at the same rate. The results do not yet demonstrate an improvement in EBITDA generated per dollar processed.

(Source : Figure)

The metric Figure will not disclose

Figure considers contribution margin a better measure of Connect's economics than the take rate. This metric would represent the channel's revenue after directly associated expenses, including operating and support costs.

Management has said on earnings calls that contribution margin on Connect is high and relatively stable, and CEO Michael Tannenbaum told analysts on the second-quarter call that the company looks at contribution margin rather than take rate when setting pricing, because it better reflects earnings power per dollar of marketplace revenue. Figure does not disclose Connect's revenue and costs separately. It is therefore impossible to calculate how much Figure retains from a loan supplied directly by a partner compared with one originated under its own brand or temporarily held as an intermediary.

Figure plans to provide more information after completing its acquisition of Kiavi, a lender to property investors, which had not closed as of the results. Until then, contribution margin cannot serve as independent evidence. The available indicators show declining revenue and underlying EBITDA per dollar processed.

An incomplete, asset-light transition

Some indicators nevertheless support the strategy. Operations and processing expenses represented approximately 79 basis points of volume, or 0.79 of a percentage point, in the second quarter of 2025. They fell to 68 basis points a year later. The direct cost of processing $100 of loans therefore declined from approximately $0.79 to $0.68.

The balance sheet presents a more mixed picture. Figure's quarterly report on Form 10-Q shows loans held for sale of $597mn at 30 Jun, compared with $404mn at the end of 2025.

Approximately $360mn was being held to provide liquidity to Democratized Prime, Figure's onchain financing marketplace designed as an alternative to traditional warehouse facilities, the short-term bank credit lines lenders normally use to fund loans before selling them. It connects institutions seeking temporary funding with investors willing to provide capital in exchange for a return.

Figure still supplies part of the funding required by this marketplace. The remainder of the $597mn primarily consists of loans originated directly by the company or temporarily held while it acts as an intermediary. They generally remain on the balance sheet for three to four weeks before being pooled and sold through Connect.

Supporting Democratized Prime increased both interest income and interest expense, while reducing the adjusted EBITDA margin by approximately 1.7 percentage points. Figure is therefore still using its own balance sheet to develop liquidity on a platform that it ultimately wants to make less dependent on its capital.

That dependence could decline as external capital providers join Democratized Prime. Third-party assets reached approximately $170mn in early August. Each dollar provided by these investors could theoretically replace part of the capital currently supplied by Figure.

The company does not yet operate like a pure software business. The 10-Q shows $597mn of loans for sale at 30 Jun, $155mn of mortgage servicing rights and $354mn of marketable securities, investments that can readily be sold, including interests retained to meet securitization requirements. Together, these assets represented almost 37% of its $3.02bn balance sheet. Figure raised $600mn through a note sale in July to fund its push into property lending, a move that added to rather than reduced those financing requirements.

Figure Connect is reducing the capital intensity of new volume, but it does not eliminate the financing requirements or assets associated with lending.

An adjusted margin that requires context

Figure changed how it calculates these adjusted measures during the period under comparison. Effective 31 Mar it added valuation changes in the fair value of marketable securities, and funding costs for YLDS, its interest-bearing digital asset, to adjusted net revenue, and added marketable-securities valuation changes to adjusted EBITDA. Effective 30 Jun it added acquisition-related costs to adjusted EBITDA. Figure applied all three changes retrospectively to earlier periods, so the year-to-year figures above are drawn on a consistent basis. They are nevertheless not the definitions the company was using when it first reported the second quarter of 2025.

Stock-based compensation also complicates the reading of Figure's results. The company excluded $26.1mn of stock-based compensation from adjusted EBITDA in the second quarter, compared with $2.8mn a year earlier. The comparison period also included $2.5mn of services paid through warrants, contracts giving the holder the right to buy shares at a set price, which were similarly excluded.

Including both forms of equity compensation produces an indicative margin of approximately 42.7% in the second quarter of 2026, compared with 42.5% a year earlier. The improvement therefore becomes almost negligible. Removing the $5.9mn profit on the minority investment as well would reduce this indicative margin to around 40%.

This calculation is not a measure reported by Figure. It merely accounts for a cost that does not necessarily require an immediate cash outflow but can dilute shareholders when the awards are issued.

What the third quarter has to prove

Figure expects between $4.8bn and $5.2bn of volume in the third quarter. The $1.7bn recorded in July already represents a quarterly pace of $5.1bn, and the company said weekly loan applications passed $1bn during the month. Reaching the midpoint of the guidance would therefore mainly require maintaining that pace after allowing for the seasonal slowdown in August and September.

The more important test lies elsewhere. Underlying EBITDA per dollar processed will need to recover, external financing on Democratized Prime will need to replace more of Figure's own capital, and the company will need to disclose Connect's contribution margin.

Figure Connect is already a powerful distribution engine. It is reducing processing costs, attracting new partners and allowing the group to generate substantially more EBITDA in absolute terms. But the available data do not yet show an improvement in the economics of each dollar processed.

The share price has already moved on the reported margin. Whether it holds depends on figures Figure has not yet published.